Canadian dollar up as greenback's momentum stalls

Thu Aug 14, 2008 9:58am EDT
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 * Canadian dollar rises as USD momentum stalls
 * Market second-guessing BoC rate outlook
 * Bond prices rise on global growth fears
 By John McCrank
 TORONTO, Aug 14 (Reuters) -  The Canadian dollar rose
against the U.S. dollar on Thursday as the currency's rapid
fall in recent weeks lost momentum with investors wagering it
had become oversold.
 Domestic bond prices rose as weak economic data out of
Europe ramped up fears about faltering global growth.
 At 9:34 a.m. (1334 GMT), the Canadian dollar was at
C$1.0609 to the U.S. dollar, or 94.26 U.S. cents, up from
C$1.0625 to the U.S. dollar, or 94.12 U.S. cents, at
Wednesday's close.
 The currency rose as high as C$1.0564 against the
greenback, its strongest level since last Friday. That follows
two back-to-back higher closes against the U.S. dollar for the
first time in nearly a month.
 The Canadian dollar fell 3.8 percent last week to its
lowest level in about a year. It was the third weekly slide in
a row, falling 0.7 percent and 1.4 percent the two previous
weeks, but the momentum appears to have stalled.
 "The market is probably a little bit disenchanted with the
fact that there's been no follow-through and it certainly feels
like we maybe in for a bit of a consolidative pull-back type of
move now." said Steve Butler, director of foreign exchange
trading at Scotia Capital.
 Another reason the currency may be gaining steam is that
the Canadian rate market has reversed some of the more
aggressive bets for interest rate cuts by the Bank of Canada,
said Stewart Hall, economist at HSBC Canada.
 Following the slide in Canadian employment numbers Friday,
down 55,000, the market was pricing in a 60 percent probability
of a September rate cut.
 Over the course of the week, the chances have been pared
back to a one in four probability.
 The Bank of Canada's next scheduled interest rate
announcement is on Sept. 3. Its key lending rate is at 3
 Bond prices rose as the market shrugged off
higher-than-expected inflation data in the United States and
focused more on concerns about global growth, which increased
the bid for safe-haven government debt.
 "There are general concerns about weakening global growth,
and of course we got more of that today in European GDP for the
second quarter," said Doug Porter, deputy chief economist at
BMO Capital Markets.
 Data showed the euro zone economy shrank by 0.2 percent in
the quarter, with economies of heavyweights France and Germany
falling 0.3 percent and 0.5 percent respectively.
 Porter said concerns persist about the global credit
crunch, which is now a year old and doesn't seem to be letting
 The next domestic economic data are due Friday, with
manufacturing sales numbers for June. Canada's economic
calendar picks up next week with June wholesale trade data on
Tuesday, June retail sales data on Wednesday and July consumer
price index data on Thursday.
 The overnight Canadian LIBOR rate LIBOR01 was 3.0833
percent, up from 3.0667 percent on Wednesday.
 Wednesday's CORRA rate CORRA= was 3.0003 percent, down
from 3.0019 percent on Tuesday. The Bank of Canada publishes
the previous day's rate at around 9 a.m. daily.
 The two-year bond rose 5 Canadian cents to C$101.72 to
yield 2.754 percent. The 10-year bond climbed 20 Canadian cents
to C$105.35 to yield 3.596 percent.
 The yield spread between the two-year and 10-year bond was
86.5 basis points, up from 83.5 basis points at the previous
 The 30-year bond added 36 Canadian cents to C$116.66 for a
yield of 4.018 percent. In the United States, the 30-year
treasury yielded 4.528 percent.
 The three-month when-issued T-bill yielded 2.53 percent, up
from 2.49 percent at the previous close.
 (Additing by Jeffrey Jones)